Asian stocks rally after Fed action

Asian stocks looked set to post their best daily gain in nine years on Monday after the Federal Reserve slashed a key US bank lending rate, while the yen fell as fears of a credit crunch faded and risk appetite rose.
The positive tone for stocks appeared likely to spread to Europe with financial bookmakers calling for modest gains for major European indexes, which surged along with US markets on Friday.
To help counter the credit market turmoil, the US central bank cut its discount rate by a half-percentage point to 5.75 percent on Friday in a surprise move that sparked a powerful rebound on Wall Street. It left its benchmark federal funds rate steady at 5.25 percent.
The Fed also said "downside risks to growth have increased appreciably," dropping its views about inflation being a major concern and signalling a willingness to take more dramatic action to cushion the economy from tightening credit.
"With the Fed now pulling out all stops in order to head off a credit crunch, it's looking increasingly likely that we have seen the bottom in share markets," said Shane Oliver, head of investment strategy at AMP Capital Investors in Australia.
"More importantly the panic selling in various markets over the last week is indicative of the sort of wash out often seen at or around market bottoms."
MSCI's measure of Asia Pacific stocks excluding Japan rose 5.3 percent by 6.20am GMT, heading for its biggest one-day percentage rise since September 1998.
This followed a 9.6 percent slump last week - its biggest weekly decline in nearly a decade.
Japan's Nikkei average ended up 3 percent, posting its biggest daily gain since July 2006 after suffering its biggest one-day fall in nearly six years on Friday.
Risk appetite rises
Spreads of emerging markets sovereign bonds over US Treasuries an important measure of risk appetite, narrowed a further 3 basis points after having tightened more than 15 points last Friday.
Still, central banks in Asia remained vigilant with the Reserve Bank of Australia injecting US$2.67 billion in cash to the banking system to temper upward pressure on some short-term market interest rates.
"Investor confidence has recovered a bit. Still, there are lingering worries over when the subprime crisis will actually end," said George Hsieh, who manages US$545 million for Capital Securities Investment Trust in Taiwan.
Global Mining giant BHP Billiton rallied 7.6 percent, boosted also by gains in industrial metals prices.

Oil, however, underperformed other commodities as the threat of supply disruption from Hurricane Dean in the US Gulf eased.
London Brent crude slid 86 cents to $US69.58 a barrel.
Japanese exporters such as Honda Motor were further supported by a fall in the yen. A weaker currency is usually good news for exporters as it tends to help lift the value of overseas sales.
Yen soft
The yen was shaky with stocks on the rebound and after suffering a steep slide on Friday.
A beneficiary of risk aversion, the Japanese currency had rallied to a 14-month high versus the dollar last week as investors unwound risky trades funded by borrowing the low-yielding unit.
The dollar rose to 114.76 yen staying well above a 14-month low of around 111.60 hit on Friday.
The euro traded up to 154.99 yen after bouncing off a nine-month low near 149.20 yen on Friday. Against the dollar, the single currency was a touch firmer about $US1.3505
But high-yielding currencies such as the kiwi were still soft despite the bounce from multi-month lows.
The kiwi bought $US0.6925, down from an earlier high near $US0.6980, having hit a nine-month trough of about $US0.6640 last Friday.
Strength in equities siphoned off demand for safe-haven government bonds, pushing Japan's 10-year bond futures down from a 17-month high struck last week.
The yield on the benchmark 10-year Japanese government bond rose 1 basis point to 1.585 percent, after having touched a near five-month low of 1.575 percent on Friday.